Durkan faces decision on tax-ruling appeal that may help define her as mayor

It's quite likely that Jenny Durkan won't get through her first day of business after she is sworn in tomorrow as Seattle's first woman mayor in more than 90 years before she has to make a decision that could help define how she will be perceived as Seattle's chief executive.The issue is the ill-framed and now court-rejected Seattle city income tax and whether or not the city will appeal the decision made by King County Superior Court Judge John Ruhl late afternoon of the day before Thanksgiving, giving those involved a long weekend to think about what now with the case. And those thinking about "what now" undoubtedly includes Durkan, who has said she favors the income tax but is also on record, the day she announced her candidacy last May, that while she views the state's tax system as too regressive, she doubts that a city income tax is the right solution. But that was before the city council that she will have to work with approved the income tax measure in July, enacting a resolution supporters called a "wealth tax," amid cheers from those in attendance of "tax the rich!" It was actually referred to as a tax on high incomes, 2 percent of the amount above $200,000 for an individual or $500,000 for those filing jointly. Perhaps spurred by the cheers from the gallery, the amount was boosted to 2.25 percent, a move criticized by opponents as an action driven by little more than a whim.Judge Ruhl found that the city had no authority under state law to impose the tax, in fact, was in violation of two state statutes, and rejected the city contention that what was called an income tax was actually an excise tax for the privilege of earning a living in Seattle. A cynic might suggest that if you are trying to sell a pig, and call it a stallion, it might bring a better price.As Ruhl wrote: the City's tax, which is labeled 'Income Tax,' is exactly that. It cannot be restyled as an 'excise tax' on the ... 'privileges' of receiving revenue in Seattle or choosing to live in Seattle."Within minutes after Judge Ruhl issued his 27-page decision, one viewed as thorough and comprehensive, and well beyond the detail that at least appellant attorneys expected, the office of Seattle City Attorney Pete Holmes said they will be appealing the decision to the state Supreme Court. Since there was no instant need for the city attorney's office (there was no indication that the statement came from Holmes rather than from someone in the office late day who was asked by the media, "are you going to appeal?"), it surprised many that there was no indication of intent to consult the soon-to-be mayor.It may come as a surprise, and irritant, to members of the city council that they have no say in the decision of whether or not to appeal. That decision rests on the mayor and the city attorney, but it's impossible to envision the decision would be made without consultation between the two, and approval from the mayor.From the time the measure was passed, there was acknowledgement that the goal was to get the issue of an income tax before a state supreme court that, proponents hope, will ignore court rules as well as its own precedents that a net income tax is unconstitutional and quickly seize this case as an opportunity to open the door for a state income tax.So despite the fact that constitutionality of the city's income tax was not part of Judge Ruhl's deliberations and decision, the forces viewing the income tax as vital to correcting a regressive state tax system are hoping the court will decide the case offers an opportunity too good to pass up, regardless of its rules.Durkan is universally regarded as a smart and courageous attorney. Deciding what to do about an appeal of Ruhl's decision will give her opportunity to call on both qualities.The reality is that continuing to needlessly stoke the fuels of anger over economic distinctions that the "tax the rich" mantra has brought is of little long-term value to the city. Any law school graduate knows that in Washington State, among many states, a losing party can ask the supreme court to review the lower court decision, but unless some glaring error leaps out, the high court procedure is to tell an appellant "take your issue to the court of appeals." So since Durkan is well aware that there is little likelihood the state high court would agree to bypass the state appellate court and grant direct review, she would have to be pandering to the city council's loudest voices to seek supreme court review, at the expense of smoothing over the Seattle political divide. And perhaps enlist a broad coalition in a goal of working to change the state's tax structure, a goal that will require support across the political spectrum.There is no doubt that Durkan will clash with the council's loudest voices, or more accurately loudest mouth, since Kshama Sawant prides herself on not having any Republican friends and Durkan has friends across the political spectrum, including a brother who is a Republican lobbyist.Intriguingly, as it relates to any mayoral concern about smooth relations, members of the city council didn't wait for Durkan to shed her "Mayor-Elect" title before they thoughtlessly planned to cut her budget by $1 million, or 17 percent, in their search for dollars after the idea of a business head tax failed.Fortunately, Mayor Tim Burgess, whose 71 days as interim mayor end when Durkan is sworn in, convinced the council it was unfair to the incoming mayor to cut such a chunk out of her budget, so they decided trim by about $500,000 the amount they were diverting. It's difficult not to be amused by the attack on a part of the mayor's budget given the fact the legislative branch budget is about twice the size of the mayor's but no one suggested that a portion come from both the mayor's and the council's budgets.Oh, and it's amusing also that the amount being cut from the mayor' budget is about what the city has agreed to spend for legal expenses defending Sawant in suits for defamation over unfortunate outbursts in two separate cases.But as to the point about Durkan helping define herself in how she decides on seeking a direct appeal, or any appeal on behalf of an obviously illegal Seattle statute.She is likely to find broad support, including many in the business community who opposed the city tax because it was enacted despite it being obviously illegal, who would join in a legitimate campaign to change what most agree is a regressive state tax system.But to begin such a broad-support effort she first has to move the City Council away from its goal of punishing the wealthy and instead focus on enlisting all segments of the population in creating a fair state tax structure.

About the author

Over the 24 years that Mike Flynn guided Puget Sound Business Journal as its president and publisher, it became one of the nation’s most respected local business newspapers, being named “best” among the publications owned by the largest chain of weekly business newspapers during his last year as publisher. In addition it was regarded by its peers as one of the five best business-news publications in the county in terms of editorial quality.